A class of exotic dancers in California and other states have received preliminary court approval of a $10 million settlement of their class action suit in which they claimed that their adult nightclub employers misclassified them as independent contractors. Trauth v. Spearmint Rhino Companies Worldwide, Inc.pdf (Case No. 5:09-cv-01316) (C.D.Cal).

The Internal Revenue Service, U.S. Department of Labor and many state labor departments also are looking to lay bare employers who they claim are misclassifying their workers. In an effort to collect more employment tax revenue, over the next three years, the IRS plans to randomly select and audit up to 6,000 businesses that use contractors. The DOL stated in its 2011-2016 strategic plan that it will partner with the IRS to root out employers who continue to misclassify employees as independent contractors.

The government efforts likely will arouse the interest of workers eager to seek unpaid minimum wage and overtime pay through class action filings.

The Bottom Line: An employer can be nakedly exposed to a wage and hour class action unless workers are properly classified.